NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
In business cycle analysis, which of the following is classified as a lagging indicator?
Average duration of unemployment is a lagging indicator because it changes only after the economy has already turned. Stock prices, building permits and new capital goods orders typically move before the cycle changes, so they are leading indicators and not lagging ones.
- AStock market index levels
- BNew building permits issued
- CAverage duration of unemploymentCorrect
- DManufacturers' new orders for capital goods
Explanation
Lagging indicators change after the economy has already turned; the average duration of unemployment and similar series confirm a trend already under way. Stock indices, building permits and new orders for capital goods tend to move ahead of the cycle, so they are leading indicators.
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